MATTHEW IN THE MIDDLE: The Unfair Wage Act

I support a national increase in the minimum wage across the board, regardless of geography or how many employees. However, I cannot support our local initiative, which is discriminatory.

This coming November we are voting on Measure R, AKA the “Eureka Fair Wage Act,” a citizens’ initiative to raise the current minimum wage by 33% to $12 per hour for any Eureka employer with 25 or more (full-time, part-time or seasonal – as low as 2 hours per week) employees, beginning 90 days from passage. Besides raising the minimum wage, it would institute an annual Cost Of Living Adjustment (COLA) increase based on the Consumer Price Index each year.

This initiative is being brought forth by former Occupy regulars - an anarchist, a homeless activist and the homeless - as a vendetta against Wal-Mart. What else do these people have in common? Not one of them owns a business, nor has to meet payroll. I know because I sat in on one of their Wednesday night meetings where I was about as welcome as Michael Moore showing up at an NRA rally.

Per the Federal Minimum Wage Act of 2007, the minimum (non-tipped) wage is $7.25 per hour. Most every state is at this level or higher, with the exceptions of Wyoming and Georgia ($5.15), Minnesota ($5.25) and Arkansas ($6.25). Minimum wage for tipped jobs is lower at $2.13 per hour.

Washington state has the highest minimum wage for both non-tipped and tipped employees in the nation at $9.32 per hour. Oregon is second at $9.10 per hour for both non-tipped and tipped employees. Seattle recently passed a $15-per-hour minimum wage, although it will be phased in over seven years and doesn’t even begin until 2015, when it will start at $10 per hour. Currently in California, San Francisco has the highest city minimum wage at $10.74 per hour with San Jose coming in a close second at $10.15 per hour.

In SeaTac (a small city outside of Seattle-Tacoma International Airport), they recently voted to increase the minimum wage to $15 per hour. Many employers responded by reducing hours or eliminating benefits such as 401(k) match, paid holidays, paid vacation, free meals, free parking and overtime.

In July 2014 California increased the state minimum wage to $9.00 per hour for both non-tipped and tipped employees, and a second increase is scheduled to $10.00 per hour in January 2016. President Obama and the Democrats have proposed raising the federal minimum wage to $10.10 an hour, however there is one political party in Congress fighting this increase as a “jobs killer.” President Obama recently signed an executive order raising the minimum wage to $10.10 for federal workers.

Minimum wage is primarily for entry-level workers, who start at the bottom and work their way up the ladder, although it is more common in certain industries, such as retail, assisted care and hospitality (hotels, restaurants and bars). It’s meant to be a starting wage, not a living wage.

At first glance, voting for this seems like a no brainer. After all, Eureka has the highest housing costs in the state, so Eureka needs the highest minimum wage.

And somewhere down the list we finally get to Humboldt County $236,000

What’s that? We don’t have the highest priced housing in the state? Let’s talk about rentals. The average two-bedroom apartment in San Francisco rents for almost $4,000 per month, while Eureka goes for around $400-$500 per door (bedroom). So let me get this straight … our median home prices are less than half of most of the other counties listed above and our rents are a fraction of San Francisco’s, yet Eureka is proposing an 11% higher minimum wage than San Francisco? One might think San Francisco will have to raise their minimum wage to $50 per hour to make up for their higher housing costs.

A two-earner household making the increased minimum wage would be earning almost $50,000 per year.

Net, net, net … a couple of problems here. While many people will be happy with an increase in minimum wage and a higher gross paycheck, their federal and state taxes will also increase, especially if this is a two-income earner family.

It’s not the wage increase but the government subsidy decreases that need to be discussed. There are many government subsidies available for low-income workers, such as HUD Section 8 housing, WIC (Women, Infants & Children), SNAP (Supplemental Nutrition Assistance Program) and Cal Fresh (AKA food stamps), along with public school free meals, CalWORKS, TANIF (Temporary Assistance to Needy Families) Medi-Cal and the IRS Earned-Income Tax Credit. Most of these benefits will go away with two higher-income earners as the benefits are “means (income and family size) tested.”

Take rental subsidies, HUD Section 8 provides government assisted housing payments for low-income families. Basically the tenant has to apply for HUD Section 8, locate housing where the landlord will accept HUD Section 8 vouchers and pay 30% of his/her gross “household” (all working adults) income toward the rent, and the Housing Authority would pick up the difference. However, as your income increases, the housing subsidy decreases, as you still have to pay 30% of your increased gross income towards rent.

Some of the local government entities and businesses with 25-plus employees that will be affected by this initiative includes the City of Eureka, Eureka City Schools, St. Joseph Hospital, Northern California Community Blood Bank, Pierson’s Building Center, Times-Standard, Grocery Outlet, Eureka Natural Foods, Cal Courts, Ramone’s, Lost Coast Brewery, Shamus T-Bones, Adel’s, Pacific Outfitters, North Coast Cleaning Services, Pacific Choice Seafoods, Coast Seafoods, Alder Bay Assisted Living, Crestwood, Visiting Angels, Red Lion, Best Western Bayshore Inn along with many chain restaurants and most national retailers. This also includes part-time and temporary workers, from Sequoia Personnel and Express Personnel.

Notice all the Humboldt County businesses (from Orick to Garberville) not listed above? All those employees get nothing, except the standard wages. Yes, this Wage Act will create a two-tier minimum wage, a caste system if you will. If there is one thing I’ve learned in life it’s that the people on the bottom rung of a caste system are not happy.

If Eureka passes this initiative it will create a higher wage island for some workers, surrounded by an ocean of standard wages. Every minimum wage worker will apply with a Eureka company that employs 25-plus people. Who will want to work in Myrtletown or Arcata when you can make 33% higher wages with a Eureka business for doing the exact same job?

All government (federal, state and local) full-time, part-time or seasonal employees might be subject to this initiative if they are based in or work in Eureka. However, this excludes home health care workers belonging to the California United Homecare Workers (CUHW) union, as they would be exempt from this initiative because of their collective bargaining agreement.

Any non-profit that is based in Eureka or performs any service in Eureka will be phased into the increased minimum wage in 18 months. I personally spoke with two local non-profits who stated, “If this minimum wage increase passes we have 18 months to relocate outside of Eureka or we will have to shut the doors.”

The initiative states, “assigns an employee(s) to perform work within the geographic boundaries of the City.” This means the owners of a catering, contracting, cleaning or trucking business with 25-plus employees based out of Arcata, McKinleyville or Fortuna (or anywhere in the United States, for that matter) doing ANY business in the City of Eureka, MUST pay their employee(s) $12 per hour.

You can already predict some of the other potential problems. Businesses in Eureka with 25-plus employees will raise their prices to cover the increased costs of labor. Some service businesses may relocate, which is as simple as getting an office outside the city limits. Many businesses will create separate entities, each with 24 employees or fewer. How many employers might reduce their current staff (lay off employees) to 24 employees or fewer? Benefits will be the first casualty.

Ramone’s has more than 25 employees; however they’re split between three locations in Eureka, one in Old Town and the other two on Harrison, (including Ramone’s Bakery). The Harrison locations are just outside the city limits. Does this mean the Ramone’s Old Town workers get $12 an hour while the Ramone’s Harrison workers will still get $9? Can you see the accounting nightmares here along with location envy?

Think eating out is expensive now? The typical restaurant exists on a profit margin of 3% or less. Labor costs are usually 35% of their overhead. When you increase labor costs by 33%, wanna guess what’s going to happen to the average price of your meal? And who will want to flip burgers at Fresh Freeze (fewer than 25 employees) when you can make 33% higher wages at McDonalds (more than 25 employees)?

An even a bigger issue will be the employees who have worked work long, hard hours for three to five years, been promoted to assistant manager with supervision stress and earned their pay increase to $12 an hour. Now someone coming in off the streets with zero education, zero work experience and zero job skills will be getting the same $12 an hour. You can already hear the conversations between the experienced employees and management on why they too need a 33% pay increase.

California law states that exempt (salaried) employees must be paid at least twice the minimum wage. There is confusion whether this means twice the current state minimum wage ($37,440) or the increased local minimum wage ($49,920).

The Measure R folks are arguing that the increased $12 wages are “fair” and “good for the economy.” If so, why did they only include Eureka and discriminate against the rest of Humboldt County? Also, if increased minimum wages are “good” why didn’t they make them “great” by increasing the minimum wage to $15 an hour? $25 per hour? Heck, why not $50 an hour? Where does this stop? It’s easy to spend someone else’s money.

The Measure R folks are also saying that the increase in minimum wage did not hurt, but rather helped San Jose’s economy. Someone should remind them that San Jose is located in the middle of Silicon Valley, you know Apple, Google, Facebook, Yahoo, Intel, HP, etc., which may have something to do with the jobs growth in the area.

From Christopher Thornbergs’s Los Angeles Times Op-Ed “How to kill hotel jobs in LA” last week: “The results strongly suggest that such a steep increase in the minimum wage could result in a sharp decline in the number of jobs in the hotel industry. And that kind of job loss could mean that as many workers would be hurt by the law as would be helped by higher wages.”

The reality is this initiative will pass, although I believe it’s discriminatory and will ultimately be ruled unconstitutional. There will be issues with Eureka being singled out for the highest minimum wage in California. Just like 2006’s Measure T (prohibiting non-local corporations from making political contributions in Humboldt County elections), which was thrown out for being unconstitutional, many are already calling this initiative unconstitutional based upon discriminating against Eureka (City proper only) employers with 25-plus employees.

-FOOD NOTES-

It’s Humboldt Restaurant Week again from September 26 through October 5. Try some of our fine local dining establishments working in conjunction with Eureka Main Street, local chambers of commerce and local food growers.